1. Problem statement: Provide answers and brief explanations for multiple choice questions 11–30 and solve Section 3 application parts. 1. Question 11: Which is normative? Answer: d) Tax levels should be reduced. Reason: Normative statements express value judgments or prescriptions, and d) contains 'should'. 2. Question 12: Which is normative? Answer: a) Interest rates should be reduced during a recession. Reason: The modal verb 'should' makes this a value judgement, so it is normative. 3. Question 13: Outcome if two countries specialize by comparative advantage and trade? Answer: c) Both countries can consume beyond their production possibilities. Reason: Specialization and trade based on comparative advantage allow consumption outside individual PPFs. 4. Question 14: A rise in the price of cars will Answer: b) will reduce the quantity demanded of cars. Reason: Law of demand: higher price leads to a movement along the demand curve to a lower quantity demanded. 5. Question 15: A rise in the price of Toyota will cause the demand for Nissan to Answer: c) shift to the right. Reason: Toyota and Nissan are substitutes, so higher Toyota price increases demand for Nissan. 6. Question 16: Result of a rise in the price of cinema tickets? Answer: b) A move along the demand curve. Reason: A change in the good's own price causes movement along the demand curve, not a shift. 7. Question 17: The 'law of price adjustment' says when ---- exceeds ---- then market price will ----. Answer: b) demand, supply, rise Reason: If demand exceeds supply, upward pressure raises price; conversely if supply exceeds demand price falls. 8. Question 18: An increase in demand for a normal good will Answer: a) raise both the equilibrium price and equilibrium quantity. Reason: Demand shift right raises equilibrium price and quantity when supply is unchanged. 9. Question 19: At intersection of two demand curves, the steeper curve always has Answer: d) the lower elasticity. Reason: A steeper demand curve is less responsive to price changes and therefore has lower price elasticity. 10. Question 20: Any one product of a related group will tend to have ------- demand, while the group may be -------. Answer: b) an elastic, inelastic Reason: Individual product demand is often more elastic because substitutes exist, while the group as a whole has fewer substitutes and may be more inelastic. 11. Question 21: Which illustrates the law of supply? Answer: c) As the price of chicken wings rises, Fred's BBQ is willing to sell more chicken wings. Reason: Law of supply: higher price induces higher quantity supplied. 12. Question 22: An increase in the price of gasoline will: Answer: b) increase the quantity of gasoline supplied. Reason: A higher price leads producers to supply more (movement along supply curve), not a shift. 13. Question 23: Which would NOT shift the supply curve for gasoline? Answer: b) an increase in the price of gasoline. Reason: A change in the own price causes movement along the supply curve, not a shift. 14. Question 24: Any situation where quantity supplied does not equal quantity demanded indicates: Answer: b) a situation in which the actions of buyers do not match the actions of sellers. Reason: Disequilibrium means quantities demanded and supplied differ, so buyers' and sellers' actions mismatch. 15. Question 25 (Figure 3): If current price is $50 and equilibrium is $35, then Answer: b) the price will fall. Reason: Price above equilibrium creates a surplus and downward pressure on price. 16. Question 26: Oranges selling at 2.00 while equilibrium is 1.56, we expect Answer: d) a surplus to exist and the market price of oranges to decrease. Reason: Market price above equilibrium produces surplus and price will decrease toward equilibrium. 17. Question 27: Because cars and gasoline are complements, an increase in the price of gasoline will Answer: b) decrease the demand for cars. Reason: Higher gasoline price reduces complementary good demand. 18. Question 28: 6 percent increase in price and 6 percent decrease in quantity demanded gives elasticity Answer: a) 1. Reason: Price elasticity = percent change in quantity divided by percent change in price = 6/6 = 1 in absolute value. 19. Question 29: If 30 percent price change causes 15 percent quantity supplied change, elasticity is Answer: b) 1/2 and supply is inelastic. Reason: Elasticity = 15/30 = 0.5 which is less than 1 so inelastic. 20. Question 30: If elasticity of supply is 2.5, supply is Answer: b) elastic. Reason: Elasticity greater than 1 implies elastic supply. 21. Section 3 Q1a: Find equilibrium for Demand $p=100-3q$ and Supply $q=30$. Solution: Supply fixes quantity at $q=30$. Substitute into demand to get price $p=100-3\times 30$. Compute $p=100-90$. Therefore equilibrium price is $p=10$ and equilibrium quantity is $q=30$. 22. Section 3 Q1b: Find equilibrium for Demand $p=100$ and Supply $p=20+4q$. Solution: At equilibrium price equate $p$ expressions so $100=20+4q$. Solve $4q=80$ which gives $q=20$. Equilibrium price is $p=100$ and equilibrium quantity is $q=20$. 23. Section 3 Q2a: Given $Q_s=200+3P$ and $Q_d=400-P$, compute equilibrium price and quantity. Solution: Set $200+3P=400-P$. Bring terms together to get $4P=200$. Solve $P=50$. Substitute to get equilibrium quantity $Q=200+3\times 50=350$. Thus equilibrium price $P=50$ and quantity $Q=350$. 24. Section 3 Q2b: Now demand is $Q_d=400-(2P+T)$ with tax $T=20$, and supply $Q_s=200+3P$. Interpretation: Let $P$ denote price received by sellers. Buyers pay $P+T$ so demand formula is written as $Q_d=400-(2P+T)$ consistent with buyers facing $2P+T$ in the stated form. Set $200+3P=400-(2P+T)$. Substitute $T=20$ to get $200+3P=400-2P-20$. Combine terms: $3P+2P=400-20-200$. So $5P=180$ and $P=36$. Buyers pay $P+T=36+20$ so buyer price is $56$. Equilibrium quantity is $Q=200+3\times 36=308$. Therefore sellers receive $36$, buyers pay $56$, and equilibrium quantity is $308$. 25. Section 3 Q3a: Plot supply and demand from Table 3.1 and identify equilibrium. Data summary: Demand points are (Price,Quantity) $(300,60)$ $(400,55)$ $(500,50)$ $(600,45)$ $(700,40)$ $(800,35)$. Supply points are $(300,30)$ $(400,40)$ $(500,50)$ $(600,60)$ $(700,70)$ $(800,80)$. Observe intersection at Price $500$ and Quantity $50$ which is the equilibrium from the table. In a plotted diagram the downward demand curve and upward supply curve cross at $(Price=500,Quantity=50)$. 26. Section 3 Q3b: Show the price floor at $700$ on the diagram and state impact. Since the floor $700$ is above equilibrium price $500$ it is binding. At price $700$ quantity demanded is $40$ and quantity supplied is $70$ from the table. This creates a surplus of $30$ units equal to $70-40$. 27. Section 3 Q3c: Impact of introducing a price ceiling of $550$. Because the market equilibrium price is $500$ and the ceiling $550$ is above equilibrium, the ceiling is nonbinding. Therefore there is no effect on price or quantity; market remains at equilibrium $Price=500$ and $Quantity=50$. Final answers summary: Multiple choice answers 11–30 are: 11 d, 12 a, 13 c, 14 b, 15 c, 16 b, 17 b, 18 a, 19 d, 20 b, 21 c, 22 b, 23 b, 24 b, 25 b, 26 d, 27 b, 28 a, 29 b, 30 b. Analytical results: Q1a $p=10$, $q=30$. Q1b $p=100$, $q=20$. Q2a $P=50$, $Q=350$. Q2b sellers' price $P=36$, buyers' price $56$, $Q=308$. Q3 equilibrium $Price=500$, $Quantity=50$, price floor 700 creates surplus 30, ceiling 550 is nonbinding.